ING Comments on The Euro, Swiss Franc

The Swiss Franc weakened slightly to 0.897 per USD, down from a seven-week high of 0.893, as the dollar strengthened following US President Donald Trump’s announcement of potential 25% tariffs on European goods, including cars.

While exports to the US have increased in response to weaker demand from China and Europe, the threat of US tariffs could impact key Swiss sectors like pharmaceuticals, machinery, and watches.

Meanwhile, Switzerland’s GDP growth slowed to 0.2% in Q4 2024, down from 0.4% in Q3, marking the weakest expansion since Q2 2023, driven by services and industrial sectors, notably the chemical and pharmaceutical industry.

With inflation declining rapidly, the Swiss National Bank faces mounting pressure to cut interest rates further.

A final reduction is expected in March, though rates are set to remain in positive territory.

The euro faces a hit if President Trump's threatened tariffs against the EU prompt the European Central Bank to deliver consecutive interest-rate cuts, MUFG Bank analyst Lee Hardman says in a note. Tariffs could weigh on eurozone growth and encourage the ECB to keep lowering rates at every meeting, at least until rates moves closer to the so-called neutral rate that neither spurs nor slows growth, he says. Still, recent comments from ECB policymakers suggest rate cuts expected by markets in March and April are "far from a done deal." That suggests a risk that the euro could rise in the near-term, although MUFG still expects the key ECB rate to fall to 2.00% this year from 2.75% currently. (renae.dyer@wsj.com)

The euro could fall further if a key survey show EU consumer confidence remained weak in February and investors sell the currency as part of month-end portfolio rebalancing, ING analyst Chris Turner says in a note. "Europe has a lot of untapped spending power (savings rates are high) if only confidence would allow that money to be put to work," he says. Further subdued confidence data would likely prove a "mild euro negative." The survey is due at 1000 GMT. The substantial outperformance of eurozone equities this month could also lead to some euro selling as institutional investors rebalance portfolios for month-end. The euro falls 0.1% to $1.0477. (renae.dyer@wsj.com)

The euro edged lower, trading just below $1.048, as traders assessed the escalation of trade tensions and its potential impact on the European economy.

US President Trump announced plans to impose a 25% tariff on imports from the EU, including cars and other goods.

In response, a European Commission spokesperson stated, “The EU will react firmly and immediately against unjustified barriers to free and fair trade, including when tariffs are used to challenge legal and non-discriminatory policies”.

Meanwhile, in Germany, coalition talks are expected to begin soon between the election-winning CDU/CSU and outgoing Chancellor Olaf Scholz’s SPD. However, incoming Chancellor Friedrich Merz ruled out a swift reform of the country’s borrowing limits.

On the monetary policy front, investors are awaiting the ECB's decision next week.

The central bank is expected to deliver another quarter-point rate cut, followed by two more by September.

There are a couple to take note of on the day, as highlighted in bold.

The first ones are for EUR/USD at the 1.0450 and 1.0475 levels. Price action is caught in between that and things are a bit tricky for EUR/USD now after the failed attempts to firmly break above the 1.0500 mark.

The weekly lows are seen around 1.0450, so buyers might work with the expiries to keep a hold of that. However, the near-term bias has shifted to be more bearish again on a drop below the key hourly moving averages at 1.0472-85. And with the failure to break 1.0500, sellers will feel comfortable in keeping some light downside pressure barring any major dollar fallout going into month-end.

Then, there is one for USD/JPY at the 150.00 level. I don't quite see that coming into play all too much though. The 100-hour moving average, now seen at 149.50, is keeping any upside momentum at bay. Meanwhile, the January low of 148.63 is helping to lock any downside momentum in the bigger picture. So, those two are still the more critical levels to watch out for on the week.

And lastly, there is one for USD/CAD at the 1.4350 level. The pair has been on a upwards streak all through this week and the expiries are not coinciding with any technical levels. So, besides being just a slight magnet in European trading, it will not matter all too much in terms of impact today.

For more information on how to use this data, you may refer to this post here.

The rupee fell 19 paise in early trade to 87.39 against the dollar on February 27 on safe haven demand as US President Donald Trump reaffirmed his tariff plans.

The home currency opened at 87.26 against a close of to 87in the previous session.

The dollar index, which measure American currency's value against six major global peers, rose to 106.621 in the early trade, against 106.416 in the previous session.

According to the Amit Pabari, managing director at CR Forex Advisors, global financial markets experienced renewed volatility as U.S. President Donald Trump reaffirmed his commitment to tariffs, announcing that duties on Canada and Mexico would take effect on April 2.

Adding to trade tensions, he hinted at a potential 25% reciprocal tariff on European goods, escalating fears of a retaliatory response from the European Union. While he also made strong rhetoric including claims that the EU was created to screw the United States, has only intensified concerns over an impending trade conflict, Pabari added.

On February 25, Indian rupee logged its worst day in three weeks by falling 50 paise as the dollar edged up on safe-haven flows after US President Donald Trump said tariffs against Mexico and Canada would go ahead as planned.Apart from the rupee, other Asian currencies also depreciated against the dollar during that day.